Monday, January 17, 2011

Financial market economists are warning of a backlash if Treasurer Wayne Swan uses an upcoming vacancy on the Reserve Bank board to remove one of his most persistent critics.

Professor Warwick McKibbin is one of the world's leading economic modelers, a contributer to debates about climate change and financial shocks from his positions at the Australian National University and the United States Brookings Institution.

He has also been a thorn in the side of the government over questions such as emissions trading and economic stimulus, declining to abide by the convention that board members stay silent away from the boardroom table.

His second five-year term expires in July. Although he has put his name forward for reappointment, there are rumors Mr Swan will replace him, with one of the names mentioned being the macroeconomist, China and climate change expert Ross Garnaut.

"It would be a mistake. You can count the number of people who are global experts in the empirical work Warwick does on one or two hands," UBS economist Matthew Johnson told the Herald...
"Warwick is the man of the hour at the moment. He is one of the few people internationally who understands the linkages that are driving our engagement with Asia. We are lucky enough to have one in Australia, and we've got one with exerience of central banking. The bar would be pretty high to replace Warwick."

Asked who would be a suitable replacement, Mr Johnson said there was no obviously better candidate.

Former Reserve Bank staffer and HSBC economist Paul Bloxham described McKibbin as an "exceptional thinker" and said it would be "hard to find someone as suitably qualified" to replace him.

McKibbin's decision to seek reappointment is unusual. Most Reserve Bank board members serve only two terms, although the government recently reappointed company director Jillian Boardbent for a third term.

"Why would you pass over Warwick given that he wants the job," said University of Technology Sydney professor Stephen Kirchner.

"There are other economists in Australia with his technical skills, but I don't there are any that also have his level of engagement with public policy, and that's what you need in that role."

"Reappointing him would show the Treasurer was willing to have a robust culture of political debate. It seems to me both sides of politics take the view that anyone who expresses an opinion contrary to government policy basically becomes an enemy and is subject to retribution."

Grattan Institute chief economist Saul Eslake disagreed saying "with absolutely no disrespect to Warwick it would be reasonable for him to be thanked assiduously for his service and wished well for the future".

"There are good reasons for having turnover. With the exception of Nugget Coombs there hasn't been a Reserve Bank Governor who has lasted more than 10 years."

The Treasurer also has to decide on a replacement for former National Farmers Federation director Donald McGauchie whose term expires in April.